smurfit stone container 1Q08PressRelease
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    smurfit stone container 1Q08PressRelease smurfit stone container 1Q08PressRelease Document Transcript

    • Contact: John Haudrich (investors), 314-656-5375 Brian Peura (investors), 314-656-5696 Tom Lange (media), 314-656-5369 Mylene Labrie (Canada), 514-864-5103 www.smurfit-stone.com SMURFIT-STONE REPORTS FIRST QUARTER 2008 EARNINGS • Adjusted net loss of $0.09 per share is comparable with prior year first quarter • Average box prices improved for fifth consecutive quarter • First quarter impacted by Calpine charge, seasonal factors, higher cost inflation, and lower box shipments 1Q 2008 4Q 2007 1Q 2007 $ (0.06) $ 0.16 $(0.21) Net income (loss) available to common stockholders per diluted share …………………………… (0.06) 0.02 0.02 Non-cash foreign currency exchange (gains) losses - Canadian Dollar……………………………… 0.01 (0.07) 0.05 Restructuring (income) charges…………………………………………………………………………… - - 0.05 Loss on early extinguishment of debt……………………………………………………………………… Other…………………………………………………………………………………………………………… 0.02 (0.02) - Adjusted net income (loss) available to common stockholders per diluted share …………………$ (0.09) $ 0.09 $(0.09) CREVE COEUR, Mo., and CHICAGO, April 22, 2008 -- Smurfit-Stone Container Corporation (NASDAQ: SSCC) today reported a first quarter 2008 adjusted net loss of $24 million, or $0.09 per diluted share. Results were flat on a year-over-year basis, and down from adjusted net income of $23 million, or $0.09 per share, in the fourth quarter 2007. Adjusted net income (loss) reflects adjustments to net income (loss) available to common stockholders per diluted share, as detailed in the chart above. Sales of $1.8 billion for the first quarter 2008 were comparable to both the prior year quarter and fourth quarter 2007. Commenting on the company’s first quarter, Moore said, “First quarter results were disappointing as we faced a challenging US business climate. We remain focused on transforming our operations and I expect continued savings from our strategic initiatives program will benefit future earnings. Selling prices improved for the fifth consecutive quarter as we completed our box price initiative from last fall. Despite this, earnings declined sequentially due to a charge related to Calpine Corrugated, seasonal factors, and significantly higher than expected cost inflation. The slower US economy also negatively impacted packaging demand.” As previously announced, Smurfit-Stone expects to acquire a controlling interest in Calpine Corrugated LLC in the second quarter 2008. The first quarter results include a $0.05 per share charge related to Calpine. First quarter operating highlights: • Seasonal factors and higher than expected cost inflation reduced earnings • Average box prices improved 1.2 percent sequentially • Per-day US box shipments down 4.4 percent year-over-year due to plant closures and business exits • Strong containerboard export demand and historically low containerboard inventory levels • Headcount reductions were 230 in the quarter, 5,580 since June 2005 Commenting on operations, Steven J. Klinger, president and COO, said: “The first quarter is typically a challenging period for our business due to softer packaging demand, the timing of employee benefit costs, and higher energy usage. The surge in oil prices further impacted energy, transportation, and chemical costs. While experiencing continued cost inflation, we successfully completed last fall’s corrugated box price increase. Smurfit-Stone’s per-day US box shipments were down 4.4 percent year-over-year. However, volume was flat when excluding the impact of box plant closures and efforts to improve low margin accounts. Our adjusted
    • — Page 2 — shipments compare favorably to the overall US market, which declined 0.7 percent as reported by the Fibre Box Association. While domestic packaging demand was down more than originally projected, containerboard export shipments were strong, our mills ran full, and our containerboard inventories remained low. We also made progress with our strategic initiatives program. In the first quarter, we closed one additional box plant and reduced headcount by 230 positions. Since June 2005, we have closed 29 box plants and headcount is down over 21 percent. While continued cost inflation is likely, we are on track to deliver targeted operational improvements in 2008.” First quarter financial highlights: • Reported debt of $3.48 billion at March 31, 2008 • $94 million in capital expenditures Commenting on the company’s financial position, Charles A. Hinrichs, senior vice president and CFO, said, “Our debt increased in the first quarter due to the seasonal increase in working capital and capital spending in our converting operations. Over the past two years, Smurfit- Stone has significantly improved its financial flexibility by reducing debt more than $1 billion, lowering interest expense, and extending debt maturities.” Smurfit-Stone remains focused on transformation program Smurfit-Stone expects sequential earnings improvement in the second quarter. Results should benefit from seasonally stronger packaging demand, less energy usage, and lower employee benefit costs despite continued significant cost inflation. Commenting on Smurfit-Stone’s long term outlook, Moore said, “As a result of our transformation program, our operations are more cost effective, our mills are more productive, and we are building one of the most modern converting operations in North America. We are confident that by staying the course and executing our plan, we will deliver long-term value for our shareholders, customers, and employees.” Smurfit-Stone management will discuss the company’s financial performance at 9:00am ET on Wednesday, April 23, 2008, via a live webcast and teleconference. Participants can join the presentation by linking to the webcast through the investor page of the company’s website at www.smurfit-stone.com or by calling (800) 931-6429 (no passcode) at least 10 minutes prior to the commencement of the presentation. The presentation will be archived on the company’s website for subsequent viewing. ### Smurfit-Stone Container Corporation (NASDAQ: SSCC) is the industry's leading integrated containerboard and corrugated packaging producer and is one of the world’s largest paper recyclers. The company is a member of the World Business Council for Sustainable Development, the Sustainable Forestry Initiative®, and the Chicago Climate Exchange. Smurfit-Stone generated revenue of $7.4 billion in 2007, has led the industry in safety every year since 2001, and conducts its business in compliance with the environmental, health, and safety principles of the American Forest & Paper Association. This press release contains statements relating to future results, which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to changes in general economic conditions, continued pricing pressures in key product lines, seasonality and higher recycled fiber and energy costs, as well as other risks and uncertainties described in the company’s Annual Report on Form 10-K for the year ended December 31, 2007, as updated from time to time in the company’s Securities and Exchange Commission filings. In this press release, certain non-U.S. GAAP financial information is presented. A reconciliation of that information to U.S. GAAP financial measures and additional disclosure regarding our use of non-GAAP financial measures are included in the attached schedules.
    • SMURFIT-STONE CONTAINER CORPORATION CONSOLIDATED BALANCE SHEETS (In millions) March 31, December 31, 2008 2007 Assets (Unaudited) Current assets Cash and cash equivalents……………………………………………… $ 10 $ 7 Receivables, net…………………………………………………………… 162 170 Retained interest in receivables sold (Note 1)………………………… 259 249 Inventories………………………………………………………………… 576 540 Prepaid expenses and other current assets…………………………… 46 36 Total current assets………………………………………………… 1,053 1,002 Net property, plant and equipment…………………………………………… 3,459 3,454 Timberland, less timber depletion…………………………………………… 32 32 Goodwill………………………………………………………………………… 2,727 2,727 Other assets…………………………………………………………………… 158 172 $ 7,429 $ 7,387 Liabilities and Stockholders' Equity Current liabilities Current maturities of long-term debt…………………………………… $ 9 $ 11 Accounts payable………………………………………………………… 587 582 Accrued compensation and payroll taxes……………………………… 165 193 Interest payable…………………………………………………………… 61 66 Income taxes payable…………………………………………………… 35 10 Current deferred income taxes………………………………………… 21 21 Other current liabilities…………………………………………………… 108 106 Total current liabilities………………………………………………… 986 989 Long-term debt, less current maturities……………………………………… 3,472 3,348 Other long-term liabilities……………………………………………………… 811 834 Deferred income taxes………………………………………………………… 310 361 Stockholders' equity Preferred stock…………………………………………………………… 98 97 Common stock…………………………………………………………… 3 3 4,074 4,066 Additional paid-in capital………………………………………………… (2,074) (2,058) Retained earnings (deficit)……………………………………………… (251) (253) Accumulated other comprehensive income (loss)…………………… Total stockholders' equity…………………………………………… 1,850 1,855 $ 7,429 $ 7,387 Note 1: At March 31, 2008 and December 31, 2007, $693 million and $656 million, respectively, of receivables had been sold under two accounts receivable programs, of which the company retained a subordinated interest. The off-balance sheet debt related to the two accounts receivable programs totaled $420 million and $422 million, respectively, as of those dates. See our Annual Report on Form 10-K for the year ended December 31, 2007 for a further description of these programs.
    • SMURFIT-STONE CONTAINER CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (In millions, except per share data) (Unaudited) Three Months Ended March 31, 2008 2007 Net sales…………………………………………………………………………………… $ 1,795 $ 1,824 Costs and expenses Cost of goods sold……………………………………………………………………. 1,583 1,610 Selling and administrative expenses………………………………………………… 191 169 Restructuring expenses……………………………………………………………… 4 24 Gain on disposal of assets…………………………………………………………… (3) Income from operations…………………………………………………………… 20 21 Other income (expense) Interest expense, net………………………………………………………………… (63) (74) Loss on early extinguishment of debt………………………………………………… (23) Foreign currency exchange gains (losses)………………………………………… 15 (5) Other, net……………………………………………………………………………… (3) (5) Loss before income taxes………………………………………………………… (31) (86) Benefit from income taxes………………………………………………………………… 18 34 Net loss......................................................................................................... (13) (52) Preferred stock dividends and accretion………………………………………………… (3) (3) Net loss available to common stockholders…………………………………… $ (16) $ (55) Basic and diluted earnings per common share Net loss available to common stockholders…………………………………… $ (0.06) $ (0.21) Weighted average shares outstanding…………………………………………………… 256 256
    • SMURFIT-STONE CONTAINER CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (In millions) (Unaudited) Three Months Ended March 31, 2008 2007 Cash flows from operating activities Net loss…………………………………………………………………………………………………… $ (13) $ (52) Adjustments to reconcile net loss to net cash provided by (used for) operating activities Loss on early extinguishment of debt………………………………………………………… 23 Depreciation, depletion and amortization…………………………………………………… 87 88 Amortization of deferred debt issuance costs………………………………………………… 2 2 Deferred income taxes………………………………………………………………………… (27) (38) Pension and postretirement benefits………………………………………………………… (9) (4) Gain on disposal of assets.............................................................................................. (3) Non-cash restructuring expenses.................................................................................... 12 Non-cash stock-based compensation............................................................................. 5 6 Non-cash foreign currency exchange (gains) losses……………………………………… (15) 5 Change in current assets and liabilities, net of effects from acquisitions and dispositions Receivables and retained interest in receivables sold………………………………… (1) (21) Inventories………………………………………………………………………………… (35) (16) Prepaid expenses and other current assets…………………………………………… (12) 4 Accounts payable and accrued liabilities………………………………………………… (6) 25 Interest payable…………………………………………………………………………… (5) (16) Other, net………………………………………………………………………………………… 5 2 Net cash provided by (used for) operating activities………………………………………………… (27) 20 Cash flows from investing activities Expenditures for property, plant and equipment……………………………………………………… (94) (96) Proceeds from property disposals……………………………………………………………………… 4 2 Net cash used for investing activities………………………………………………………………… (90) (94) Cash flows from financing activities Proceeds from long-term debt………………………………………………………………………… 675 Net borrowings (repayments) of long-term debt……………………………………………………… 122 (571) Debt repurchase premiums......................................................................................................... (19) Preferred dividends paid………………………………………………………………………………… (2) (2) Deferred debt issuance costs…………………………………………………………………………… (7) Net cash provided by financing activities……………………………………………………………… 120 76 Increase in cash and cash equivalents………………………………………………………………… 3 2 Cash and cash equivalents Beginning of period……………………………………………………………………………………… 7 9 End of period………………………………………………………………………………………………$ 10 $ 11
    • SMURFIT-STONE CONTAINER CORPORATION SELECTED FINANCIAL HIGHLIGHTS (In millions, except per share data) (Unaudited) 2008 2007 1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Net sales……………………………………………$ 1,795 $ 1,824 $ 1,870 $ 1,885 $ 1,841 $ 7,420 Containerboard and corrugated containers segment operating profit ………...…………… $ 108 $ 102 $ 162 $ 182 $ 158 $ 604 Interest expense, net …………………………… (63) (74) (73) (73) (65) (285) Corporate expenses…………………………….. (48) (44) (46) (44) (43) (177) Other income (expense), net…………………… (28) (70) (47) (114) 13 (218) Pre-tax income (loss) from operations…… $ (31) $ (86) $ (4) $ (49) $ 63 $ (76) Net income (loss) available to common stockholders……………………………………. $ (16) $ (55) $ (5) $ (96) $ 41 $ (115) Net income (loss) available to common stockholders per diluted share………………… $ (0.06) $ (0.21) $ (0.02) $ (0.38) $ 0.16 $ (0.45) Adjusted net income (loss) per diluted share. $ (0.09) $ (0.09) $ 0.06 $ 0.11 $ 0.09 $ 0.17 Adjusted EBITDA……………………………….. $ 121 $ 135 $ 206 $ 217 $ 197 $ 755 Depreciation, depletion and amortization……… $ 87 $ 88 $ 93 $ 91 $ 88 $ 360 Capital expenditures …………………………… $ 94 $ 96 $ 75 $ 97 $ 116 $ 384 Pension contributions…………………………… $ 20 $ 31 $ 36 $ 48 $ 14 $ 129 Total reported debt ……………………………… $ 3,481 $ 3,739 $ 3,734 $ 3,406 $ 3,359 $ 3,359
    • SMURFIT-STONE CONTAINER CORPORATION STATISTICAL INFORMATION 2008 2007 1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Containerboard System North American Mill Operating Rates (Containerboard Only)…… 100.0% 97.1% 98.1% 100.0% 99.8% 99.2% North American Containerboard Production - M Tons…………… 1,784 1,813 1,851 1,893 1,779 7,336 Year over Year Avg. Domestic Linerboard Price Change………… 7.5% 12.8% 3.1% -0.2% 7.8% 4.9% Sequential Avg. Domestic Linerboard Price Change……………… -0.5% -0.3% 0.6% 1.6% 5.7% N/A Pulp Production - M Tons…………………………………………… 123 145 134 149 146 574 SBS/Bleached Board Production - M Tons………………………… 33 78 82 76 33 269 Kraft Paper Production - M Tons…………………………………… 43 46 47 39 45 177 Corrugated Containers North American Shipments - BSF ….……………………………… 17.6 19.0 18.9 18.5 17.9 74.3 Per Day North American Shipments -MMSF…………………….. 279.1 296.7 299.3 293.7 295.0 296.2 Year over Year Avg. Corrugated Price Change…………………… 4.7% 6.9% 3.3% 0.6% 3.5% 3.5% Sequential Avg. Corrugated Price Change………………………… 1.2% 0.1% 0.7% 0.3% 2.4% N/A Fiber Reclaimed and Brokered - M tons………………………………… 1,716 1,721 1,679 1,688 1,754 6,842
    • SMURFIT-STONE CONTAINER CORPORATION EBITDA, As Defined Below (In millions) (Unaudited) 2008 2007 1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Net income (loss)…………………………………………………….. $ (13) $ (52) $ (2) $ (93) $ 44 $ (103) (Benefit from) provision for income taxes………………………. (18) (34) (2) 44 19 27 Interest expense, net...…………….……………………………… 63 74 73 73 65 285 Depreciation, depletion and amortization………………………… 87 88 93 91 88 360 EBITDA 119 76 162 115 216 569 Receivables discount expense…………………………………… 6 7 9 7 4 27 Restructuring (income) charges…………….…………………… 4 24 10 11 (29) 16 Non-cash foreign currency exchange (gains) losses..………… (15) 5 20 22 5 52 Litigation charges…………………………………………………. 8 Loss on early extinguishment of debt………...…………………… - 23 5 1 - 29 (Gain) loss on sale of assets…………….………………………… (1) - - 64 1 65 Pension curtailment…………….………………………………… - - - (3) - (3) Adjusted EBITDA ……………..………………………………………… $ 121 $ 135 $ 206 $ 217 $ 197 $ 755 quot;EBITDAquot; is defined as net income (loss) before (benefit from) provision for income taxes, interest expense, net and depreciation, depletion and amortization. quot;Adjusted EBITDAquot; is defined as EBITDA adjusted as indicated above. EBITDA and Adjusted EBITDA are non-GAAP financial measures. See disclosure following regarding the use of non-GAAP financial measures.
    • SMURFIT-STONE CONTAINER CORPORATION ADJUSTED NET INCOME (LOSS) PER DILUTED SHARE (In Millions, Except Per Share Data) (Unaudited) 2008 2007 Year 1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Net income (loss) available to common stockholders (GAAP) …………………………………… $ (16) $ (55) $ (5) $ (96) $ 41 $ (115) - 14 3 - - 17 Loss on early extinguishment of debt, net of income taxes..……………………..….…..………… (15) 5 20 22 5 52 Non-cash foreign currency exchange (gains)/losses………….…………………………………… (1) - - 97 - 97 (Gain) loss on sale of assets, net of income tax………………………………………………. Restructuring (income) charges, net of income taxes...…………………………………………… 3 14 1 7 (18) 4 Litigation charges, net of income taxes...…………………………………………………………… 5 - - - - - Pension curtailment, net of income taxes...………………………………………………………… - - - (2) - (2) Resolution of a prior year income tax matter...……………………………………………………… - - (4) - - (4) Reduction in Canadian statutory income tax rates...…………………………………………….. - - - - (5) (5) Adjusted net income (loss) available to common stockholders (Note 1)....................................... $ (24) $ (22) $ 15 $ 28 $ 23 $ 44 2008 2007 1st Qtr 1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Year Net income (loss) per diluted share available to common stockholders (GAAP) ………….. $ (0.06) $ (0.21) $ (0.02) $ (0.38) $ 0.16 $ (0.45) - 0.05 0.01 - - 0.07 Loss on early extinguishment of debt..……………………..….…..…………………………….. (0.06) 0.02 0.08 0.09 0.02 0.20 Non-cash foreign currency exchange (gains)/losses………….………………………………… - - - 0.38 - 0.38 (Gain) loss on sale of assets…………………………………………….………………………. Restructuring (income) charges...………………………………………………………………… 0.01 0.05 0.01 0.03 (0.07) 0.02 Litigation charges...…………………………………………………………………………………… 0.02 - - - - - Pension curtailment...………………………………………………………………………………. - - - (0.01) - (0.01) Resolution of a prior year income tax matter...………………………………………………….. - - (0.02) - - (0.02) Reduction in Canadian statutory income tax rates...…………………………………………… - - - - (0.02) (0.02) Adjusted net income (loss) per diluted share available to common stockholders (Note 1)........... $ (0.09) $ (0.09) $ 0.06 $ 0.11 $ 0.09 $ 0.17 Note 1: Exclusive of loss on early extinguishment of debt, non-cash foreign currency (gain) loss, (gain) loss on sale of assets, restructuring charges, litigation charges, pension curtailment, resolution of a prior year income tax matter and reduction in Canadian statutory income tax rate. Adjusted net income (loss) available to common stockholders and adjusted net income (loss) per diluted share available to common stockholders are non-GAAP financial measures. See disclosure following regarding the use of non-GAAP financial measures.
    • SMURFIT-STONE CONTAINER CORPORATION NON-GAAP FINANCIAL MEASURES We measure our performance primarily through our operating profit. In addition to our audited consolidated financial statements presented in accordance with U.S. generally accepted accounting principles (“GAAP”), management uses certain non-GAAP financial measures, including “EBITDA,” “adjusted EBITDA” and “adjusted net income (loss) per diluted share available to common stockholders” to measure our operating performance. We provide a definition of the components of these measurements and reconciliation to the most directly comparable GAAP financial measure. These non-GAAP measures are considered by our Board of Directors and management as a basis for measuring and evaluating our overall operating performance. They are presented to enhance an understanding of our operating results and are not intended to represent cash flow or results of operations. The use of these non-GAAP measures provides an indication of our ability to service debt and we consider them appropriate measures to use because of our highly leveraged position. We believe these non-GAAP measures are useful in evaluating our operating performance compared to other companies in our industry, and are beneficial to investors, potential investors and other key stakeholders, including analysts and creditors who use these measures in their evaluations of our performance. EBITDA has certain material limitations associated with its use as compared to net income. These limitations are primarily due to the exclusion of certain amounts that are material to our consolidated results of operations, such as interest expense, income tax expense and depreciation and amortization. In addition, EBITDA may differ from the EBITDA calculations of other companies in our industry, limiting its usefulness as a comparative measure. Because of these limitations, EBITDA should not be considered a measure of discretionary cash available to us to invest in our business and should be read in conjunction with our consolidated financial statements prepared in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and adjusted EBITDA only as supplemental measures of our operating results. The presentation of this additional information is not meant to be considered in isolation or as a substitute for financial statements prepared in accordance with GAAP. The EBITDA presentation includes a reconciliation to net income which we believe is clear and useful to our stakeholders. A further reconciliation to adjusted EBITDA excludes certain unusual or non-recurring items, and presents a more accurate picture of our operating performance. We use adjusted EBITDA to provide meaningful supplemental information regarding our operating performance and profitability by excluding from EBITDA certain unusual or nonrecurring items that we believe are not indicative of our ongoing operating results as follows: • Loss on Early Extinguishment of Debt – which represents unamortized deferred debt issuance cost or call premiums charged to expense in connection with our financing activities. • Non-Cash Foreign Currency Gain or Loss – which is recorded in connection with fluctuations in the Canadian dollar. The functional currency for our Canadian operations is the U.S. dollar. Fluctuations in Canadian dollar-denominated monetary assets and liabilities result in non-cash gains or losses. • Gain or Loss on Sale of Assets – related to significant transactions which occur on an infrequent basis. • Receivables Discount Expense – which is recorded in connection with our accounts receivable securitization program and is considered a financing activity similar to interest expense that is added back in our presentation of adjusted EBITDA in a manner consistent with our interest expense. • Restructuring Charges – which consist primarily of facility closures and other headcount reductions. A significant amount of these restructuring charges are non-cash charges related to the write-down of property, plant and equipment to estimated net realizable value. We exclude these restructuring charges to more clearly reflect our ongoing operating performance. • Litigation Charges - related to significant legal matters which occur on an infrequent basis. • Pension Curtailment – which occur on an infrequent basis. We also use the non-GAAP measure “adjusted net income (loss) per diluted share available to common stockholders.” Management believes this non-GAAP financial measure provides investors, potential investors, security analysts and others with useful information to evaluate the performance of the business because it excludes gains and losses and charges that management believes are not indicative of the ongoing operating results of the business. In addition, this non-GAAP financial measure is used by management to evaluate our operating performance for the same reasons as detailed above in the description of the related components excluded from EBITDA to arrive at adjusted EBITDA.